ESAs asks European Commission for input on priority SFDR issues

On 7 January 2021, the Joint Committee of the European Supervisory Authorities (ESAs) sent a priority issues letter to the European Commission regarding the application of the Sustainable Finance Disclosure Regulation (SFDR, link). During the course of the work on the draft regulatory technical standards under the SFDR, the ESAs have encountered several important areas of uncertainty in the interpretation of SFDR.

While, as the ESAs indicate, many of these interpretative uncertainties of SFDR may be clarified in due course, the ESAs have identified certain priority questions pertaining to the SFDR that would benefit from a more urgent clarification to facilitate an orderly application of SFDR from 10 March 2021.

Among other things, the priority areas of SFDR see on the following topics: (i) the application of SFDR to non-EU Alternative Investment Fund Managers (AIFMs) and registered AIFMs; and (ii) the meaning of “promotion” in the context of products promoting environmental or social characteristics.

Application SFDR to AIFMs

With respect to the application of SFDR to non-EU AIFMs and registered AIFMs, the ESAs are wondering if he SFDR applies to registered (sometimes referred to as sub-threshold) AIFMs referred to in Article 3(2) AIFMD? And if the SFDR applies to non-EU AIFMs, for example when they market a sustainable EU Alternative Investment Fund under a National Private Placement Regime?

Meaning of promotion

The ESAs also indicated that clarification on the level of ambition of the environmental or social characteristics through the provision of examples of different scenarios that are within, and outside, the scope of promotion would assist the orderly application of SFDR. In this respect, the ESAs, inter alia, raised the following question: can the name of a product, which may include words like “sustainable”, “sustainability”, or “ESG” be considered to qualify a product to be promoting an environmental or social characteristic or to be having sustainable investment as its objective?

The other topics are:


  • the application of the 500-employee threshold for principal adverse impact reporting on parent undertakings of a large group;
  • the application of Article 9 of SFDR; and
  • Application of SFDR product rules to MIFID portfolios and other tailored products.


The ESAs have asked the European Commission to respond to the letter before 10 March 2021. We would like to advise market parties to closely monitor the response of the European Commission.